Entzie v. Entzie

Appeal from the District Court of McIntosh County, South Central Judicial District, the Honorable Donald L. Jorgensen, Judge.

The opinion of the court was delivered by: Kapsner, Justice

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

[¶1] Allen Entzie appeals and Theresa Entzie cross-appeals from an amended judgment modifying Allen Entzie's child support obligation. We hold the district court erred as a matter of law by failing to comply with the child support guidelines, and we reverse and remand the district court's calculation of Allen Entzie's child support obligation. We affirm the district court's deviation from the child support guidelines for the children's needs and affirm the award of partial attorney fees.

I.

[¶2] Allen Entzie is a self-employed farmer. Allen Entzie and Theresa Entzie were married and have four children together. The parties divorced in 2007. Upon divorce, the district court entered a judgment, based on the parties' stipulation, requiring Allen Entzie to pay $246 per month in child support for the four minor children. On May 12, 2009, Theresa Entzie filed a motion to amend the judgment and modify Allen Entzie's child support obligation, alleging Allen Entzie had an increased ability to pay because he acquired significant parcels of land since the divorce. The motion also alleged a need to deviate upward from the child support guidelines because the children's needs increased. On August 26, 2009, Theresa Entzie amended her motion to amend the judgment and requested an award of attorney fees, contending Allen Entzie prolonged discovery and increased litigation costs. Allen Entzie responded to Theresa Entzie's motion to amend and recalculate his child support obligation and requested the district court reduce the amount of his support obligation, because the oldest child was no longer a minor and only three children needed support.

[¶3] The district court held a hearing on October 23, 2009 and entered an order granting the motion to amend the judgment on December 9, 2009. On January 27, 2010, the district court entered an order incorporating Theresa Entzie's proposed amended judgment. The district court found Allen Entzie was a self-employed farmer and underemployed. The district court imputed income to calculate Allen Entzie's child support obligation by adding a minimum wage income to the rental value of land Allen Entzie inherited or had "direct control over." The district court found Allen Entzie engaged in "various income tax reducing programs and avenues." The district court determined two children, C.E. and T.E., have increased needs and expenses and applied an upward deviation to the child support obligation in the amount of $100 per child per month. The district court awarded Theresa Entzie partial attorney fees after finding Allen Entzie increased the cost of discovery and his income was more than twice Theresa Entzie's income.

II.

[¶4] This Court's standard of review of a district court's child support determination is well-established:

[¶5] Allen Entzie argues the district court erred as a matter of law by failing to comply with the requirements of the child support guidelines on calculating self-employment income from farming.

[¶6] "A proper finding of net income is essential to determine the correct amount of child support under the child support guidelines . . . ." Halberg v. Halberg, 2010 ND 20, ¶ 10, 777 N.W.2d 872 (quoting Gunia v. Gunia, 2009 ND 32, ¶ 13, 763 N.W.2d 455; Berge v. Berge, 2006 ND 46, ¶ 8, 710 N.W.2d 417). In order for the court to properly determine an obligor's support obligation, the obligor's income must be documented through "the use of tax returns, current wage statements, and other information to fully apprise the court of all gross income." N.D. Admin. Code § 75-02-04.1-02(7). If tax returns are unavailable or the court finds the returns unreliable, the guidelines require the court to use profit and loss statements which more accurately reflect the obligor's current self-employment income, in order to properly calculate income. N.D. Admin. Code § 75-02-04.1-05(3); Doepke, 2009 ND 10, ¶¶ 7, 12, 760 N.W.2d 131. Under the child support guidelines, "[e]ach child support order must include a statement of the net income of the obligor used to determine the child support obligation, and how that net income was determined." N.D. Admin. Code § 75-02-04.1-02(10). In Berge, this Court reversed and remanded the lower court's child support order because the court did not explain how various figures were calculated, what evidence supported the inclusion of such figures, or what evidence supported the exclusion of other income. Berge, at ¶ 9. The district court erred as a matter of law by excluding such statements and simply adopting the obligor's calculations. Id. The lower court cannot arbitrarily ignore the child support guidelines. See Kobs v. Jacobson, 2005 ND 222, ¶ 8, 707 N.W.2d 803. A court must make specific findings of fact that an obligor's tax returns do not adequately reflect the obligor's income, or are not a reliable indicator of future income, before the court can refuse to consider tax return information. See id.; see also Heinle v. Heinle, 2010 ND 5, ¶¶ 38, 41, 777 N.W.2d 590.

[¶7] At the hearing in the district court, Theresa Entzie presented Allen Entzie's tax returns for the years 2004 through 2008. The district court did not make any findings about Allen Entzie's net income or why it was unable to calculate his income based on the tax returns or other evidence in the record. The district court's orders include figures from Allen Entzie's tax returns, but the orders do not contain the required income calculations under the child support guidelines. The order granting the motion to amend judgment does not state why there are no income calculations from Allen Entzie's tax returns or other financial documents. The district court erred as a matter of law by failing to document Allen Entzie's income through tax returns, or alternatively, through profit and loss statements. On remand, the district court must calculate Allen Entzie's income from the proper documents under the guidelines. Before disregarding such information, the district court must make specific findings on the reliability or adequacy of Allen Entzie's tax returns.

[¶8] The district court's findings include the figures for gross income, depreciable assets and deductions, and adjusted self-employment income from Allen Entzie's 2007 and 2008 tax returns. The child support guidelines contain specific provisions for determining an obligor's income from self-employment. Halberg, 2010 ND 20, ¶ 11, 777 N.W.2d 872. In self-employment cases, net income from self-employment is gross income and is subject to the same deductions, to the extent they were not already deducted when net income from self-employment was calculated. N.D. Admin. Code § 75-02-04.1-05(9); see also N.D. Admin. Code § 75-02-04.1-01(5). Net income from self-employment is total income for internal revenue service purposes. N.D. Admin. Code § 75-02-04.1-05(1). The court must average the past five years of a self-employed obligor's financial information, if self-employment activities have been operated on a substantially similar scale for the most recent five years. N.D. Admin. Code § 75-02-04.1-05(4). If self-employment activities have not been operated on a substantially similar scale in the most recent five years, the court may use a shorter period of time. Id.

[¶9] The district court erred as a matter of law by not calculating Allen Entzie's self-employment income according to the child support guidelines and by not averaging the most recent five years of Allen Entzie's self-employment income. The district court must make specific findings on why a five-year average of self-employment income is not reflective of current income before the court can use a shorter period of time. The district court must apply the guidelines to calculate an obligor's net income, even if the obligor is self-employed, the court has little evidence to consider, or an accurate depiction of income is difficult. Fleck, 2010 ND 24, ¶ 16, 778 N.W.2d 572. On remand, the district court must properly calculate Allen Entzie's net income from ...

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